Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I had a LL.M Taxation. I needed only to don my cape…. taxgirl® was born. Today, I live and work in Philadelphia, PA, one of the best cities in the world (I can't even complain about the sports teams these days). I landed in the City of Brotherly Love by way of Temple University School of Law. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. I even took the lead on a successful audit. At audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax.

"Amazon Tax" Repealed Under New Law

Talk about down to the wire… The Amazon deal is so fresh (it was passed after 10pm last night) that you can’t find much in the way of confirmation yet on the web. In fact, the California legislature has the bill, AB 155, listed as “in assembly” since the vote taken on yesterday is still considered an “unofficial ballot.” I’m assuming – since I’m not familiar with California’s legislative process – that the votes have to be certified before the bill can be moved to the governor’s office; if any of my California readers can shed some light on the process, your commentary would be welcome.

Gov. Brown (D) has until October 9, 2011, to sign or veto the bill. His office has not officially signaled whether he will sign but judging from the overwhelming support of the bill in the legislature, my gut is that he will. You can see how the votes stacked up here.

AB 155, as amended, temporarily repeals ABX1 28, widely referred to as the “Amazon Tax” for its ties to the online retailing giant. Over the past few days, Amazon has been working hard to craft a deal that would delay the implementation of the old law. It appears that they were successful.

Under existing law, retailers “engaged in business” in the state of California were responsible for collecting sales tax. The law defined a “retailer engaged in business in this state” to include:

a retailer that has substantial nexus with this state and a retailer upon whom federal law permits the state to impose a use tax collection duty;

a retailer entering into an agreement or agreements under which a person or persons in this state, for a

commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an Internet-based link or an Internet Web site, or otherwise, provided that 2 specified conditions are met, including the condition that the retailer, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in this state in excess of $500,000; and

a retailer that is a member of a commonly controlled group, as defined under the Corporation Tax Law, and a member of a combined reporting group, as defined, that includes another member of the retailer’s commonly

controlled group that, pursuant to an agreement with or in cooperation with the retailer, performs services in this state in connection with tangible personal property to be sold by the retailer.

Under the new law, the definition of a “retailer engaged in business in this state” is revised and other caveats and exceptions may apply (of course). The real result is that Amazon and other online retailers won’t have to collect sales tax from consumers until September 15, 2012. Amazon, in turn, has agreed to drop its efforts to put the issue on the voting ballot.

As part of the deal, Amazon will bring back its affiliate program in California – at least for one year.

The deal is contingent on the feds not passing any law that usurps this one between now and July 2012. Although, oddly enough, everyone involved in the deal promised to work to push through the Main Street Fairness Act which would impose a national standard for sales tax among the various states. I said yesterday, on the this WEEK in Law’s Sex, Death and Taxes episode, that I don’t think this will happen in a year. I stand by that.

That “we’ll bring 7,000 jobs to California” clause that was touted by Amazon? Not part of the deal. But that likely has everything to do with timing. Amazon was pushing for a two year reprieve; they got one.

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